Coca-Cola shares plummet due to deteriorating risk appetite.

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Total revenue for the third quarter decreased 8.4% year-over-year, while non-GAAP EPS was $0.55.
The Coca-Cola business is still struggling to reach pre-Covid
If the price falls below 45 dollars, it would be a “sell” signal, and we have the open path to 40 dollars

Coca-Cola stock (NYSE: KO) has dropped from $60 to less than $37 in less than nine months, and the current price is around $48. Some analysts still see Coca-Cola’s valuation as bubbling, but still Coca-Cola could be a very good opportunity for short-term traders trading “stop-loss” and “take-profit” orders.

Fundamental analysis: The company’s business is affected by the Coronavirus Covid 19 pandemic

The Coca-Cola Company is an American multinational beverage company with headquarters in Atlanta. The main business of this company is the production, retail and marketing of concentrates and syrups of non-alcoholic beverages.

The company is known for its famous beverage Coca-Cola and for the fact that it has been increasing its dividends every year for 57 years. Coca-Cola has published its third quarter earnings results, total revenues declined 8.4% year-over-year, while non-GAAP EPS for the third quarter was $0.55.

The Company’s business is impacted by the environment of the Coronavirus Covid 19 pandemic and the Company is still struggling to reach pre-Pandemic Covid levels. Coca-Cola reported that organic sales decreased by 6% in the third quarter and the company lost value shares in the total value of its non-alcoholic finished beverages.

James Quincey, CEO of Coca-Cola, said the company has not seen demand return to pre-pandemic levels, even in markets where the corona virus is largely under control. The company is cutting jobs and will create new operating units focused on regional and local execution.

This is part of the general reorganization, and Coca-Cola will offer employees the opportunity to take advantage of a voluntary separation package. Nevertheless, analysts raised the EPS estimate for FY20 to $1.90 from a consensus of $1.88 and the EPS estimate for FY21 to $2.13 from a consensus of $2.09.

It is also important to note that some fund managers have a buy rating of KO and a price target of $55, which I think is a little optimistic. If we compare the total equity of $20.3 billion and the market capitalization of $206 billion, we can see that this stock is overvalued and maybe this is not the best time to invest in Coca-Cola stock.

Technical analysis: Bulls focus on breaking through the $50 resistance
Data source: tradingview.com

On this diagram I have marked important resistance and support levels. The important support levels are $45 and $40, $50, $55 and $60 represent the resistance levels. If the price jumps above $50, it would be a signal to buy Coca-Cola stock and we have the open path to $55.

A rise above $60 supports the continuation of the upward trend, and the next price target could be around $65. On the other hand, if the price falls below $40, this would be a strong “sell” signal and we have the open path to $36.

Summary

If you compare the total equity of $20.3 billion to the market capitalization of $206 billion, you will see that this stock is overvalued, and perhaps this is not the best time to invest in Coca-Cola stock. The company’s business is affected by the Covid-19 coronavirus pandemic and the next few months will be competitive for the beverage industry. Coca-Cola has published its third quarter earnings results, total revenues declined 8.4% year-over-year, while non-GAAP EPS for the third quarter was $0.55. The company is downsizing its workforce and may have cash flow problems in the future.

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